Most emerging Asian currencies rose on Thursday as investors covered short positions, viewing recent slides as overdone, and on demand by exporters, although the outlook for regional units stayed murky on European debt worries. The Taiwan dollar, the Philippine peso and the South Korean won gained as exporters in those economies bought them for month-end settlements.
The Singapore dollar and the Malaysian ringgit advanced as traders reduced long positions in the US dollar following rebounds in the euro and regional shares. Still, investors refrained from chasing emerging Asian currencies as violent protests against austerity steps in Spain and Greece highlighted the challenges facing debt-ridden euro zone countries.
"In general we are probably seeing some profit-taking (from dollars) today, as markets probably overreacted on the dollar strength," said Maybank FX research head Saktiandi Supaat in Singapore. But until the situations in Spain and Greece are resolved, "there is always the risk of safe haven flows into the dollar, causing Asian currencies to lose their medium-term fundamentals," Supaat added.
Since last week, most emerging Asian currencies have given up part of gains this month powered by major central banks' policy easing. Now, investors have shifted focus back to the slowing global economy and the European debt crisis. The Taiwan dollar rose on month-end demand from exporters and some inflows from foreign financial institutions. Exporters were lined up to sell the US dollar above levels of 29.400 versus the Taiwan dollar, according to dealers.
But the central bank was suspected of buying greenbacks around 29.350, limiting the upside of the island's currency, dealers said. The won rose on settlement demand from exporters while interbank speculators cleared dollar-long positions. "Continuous demand from exporters prevented some offshore funds from covering dollar-short positions. They may adjust those positions only if dollar/won rises to 1,125," said a foreign bank dealer in Seoul said.
The Philippine peso gained as interbank speculators cut dollar holdings, although investors stayed cautious over possible demand for the greenback before the end of the quarter and month. A European bank dealer in Manila said the peso is seen having room to strengthen further. Market players appeared to still hold dollar long positions to clear, he added.
Still, the dealer said the local unit is unlikely to strengthen past 41.80 per dollar. The ringgit advanced as investors covered short positions in the Malaysian currency with the euro holding ground. Still, the local unit found a resistance line at 3.0700 as domestic investors bought dollars around the level. The Singapore dollar tried to clear a resistance level at 1.2277 per US dollar, the 38.2 percent Fibonacci retracement of its weakness since mid-September.